Jernigan Capital Announces Results for the Year Ended December 31, 2015 and Reports on Capital Activities

Category:

Dateline:

Public Company Information:

NYSE:

JCAP

"I am very pleased that in nine months from a standing start we were able to consummate $175.7 million of high quality investment transactions that will provide impressive returns to our shareholders as these investments mature, as well as develop a robust pipeline for future value creation"

Closed $175.7 million of investment transactions during nine months
between IPO and year-end;

Created robust pipeline in excess of $600 million at March 7, 2016,
including $119.4 million subject to active term sheets;

Obtained up to $110.0 million of additional private capital in joint
venture with funds managed by Heitman Capital Management LLC (the
“Heitman Joint Venture”);

Executed term sheet for secured credit facility for up to $60.0
million expected to close in late March 2016;

Created substantial potential value in profits interests in
development projects and elected fair value accounting to allow for
reporting of value in profits interests; and

Positioned company for future growth with experienced team having
broad skill-sets and platform designed for substantially greater
investment portfolio.

“I am very pleased that in nine months from a standing start we were
able to consummate $175.7 million of high quality investment
transactions that will provide impressive returns to our shareholders as
these investments mature, as well as develop a robust pipeline for
future value creation,” commented Dean Jernigan, Chairman and Chief
Executive Officer of Jernigan Capital, Inc. “We are extremely excited
about the Heitman Joint Venture and the expected capital it will add to
our platform. Companies which I have led have done several joint
ventures with Heitman-managed funds, and we view the Heitman commitment
to be a ringing endorsement of our business model and ability to create
value for our owners. While we have faced certain challenges that are
common to early-stage public companies, we have aggressively solved
those challenges by obtaining accretive capital from world class real
estate investors who believe in our ability to create value and by
building an outstanding team and platform that can absorb substantial
growth and deliver exceptional returns in the future.”

The Company executed a joint venture agreement with Heitman on March 7,
2016. Under the joint venture agreement, the Company will contribute to
the Heitman Joint Venture three existing investments with an aggregate
committed principal amount of approximately $41.9 million and is
obligated to provide all new development investment opportunities to the
joint venture until the earlier of March 31, 2017 or until the joint
venture’s capital is fully committed. Heitman has committed up to $110.0
million for a 90% interest in the joint venture, with the Company
committing $12.2 million for a 10% interest (approximately $7.9 million
of which will be contributed in the form of the drawn balances on the
three existing investments). The maximum investment by Heitman is
contingent on a $75.0 million institutional co-investment that has not
yet been finalized, though it is in process. If an institutional
co-investor does not consummate a proposed investment within 60 days,
the joint venture will remain at approximately $41.9 million and the
Company will no longer be obligated to provide any new development
investment opportunities to the joint venture. Total capital committed
to the joint venture is $122.2 million. The Company expects to receive
preferential distributions and administrative fees between $1.1 million
and $1.2 million over the life of the joint venture, and can receive
promoted interests of up to 40% after various return hurdles are reached
by Heitman.

“We believe this partnership with Heitman is an outstanding capital
solution for us at this stage of our existence,” said John Good,
President and Chief Operating Officer of the Company. “The joint venture
provides capital to sustain the impressive growth we have experienced
during our first nine months, creates the potential for a return that we
believe is most compelling to our existing shareholders, and at the same
time allows us to leverage the excellent platform we have built with
additional income to offset a portion of our general and administrative
expenses. Combined with a proposed $60.0 million credit facility that we
hope to close in a few weeks, we have created the ability to continue
funding our impressive pipeline of high-return investment opportunities
and aggressively pursuing new programmatic developers.”

Mr. Good continued: “Based on prevailing cap rates and projected
property operating results at stabilization, we believe we have created
between $20.5 million and $28.5 million of additional shareholder value
through our profits interests in our development investments (including
those made through the Heitman Joint Venture), which we believe
translates to a current implied value of our common stock between $19.50
and $21.00 per share. We expect shareholders to see this value creation
in coming quarters as existing development projects are completed and we
reflect the value of our profits interests in those projects through our
fair value adjustments in our financial statements.”

Mr. Jernigan continued: “We continue to experience exceptional
fundamentals in the self-storage sector, with occupancies at all-time
highs and demand far outpacing supply. These dynamics have created a
development opportunity from which we are uniquely positioned to benefit
through our creative and flexible financing structure, our ability to
leverage our industry knowledge and experience to add value to
developers and our large network of industry contacts that has produced
deal flow in excess of $1.0 billion during our first nine months in
business. We are very excited about our position and future.”

Financial Highlights

At December 31, 2015, the Company had closed 24 investment transactions
for an aggregate committed principal amount of $175.7 million. These
investments consisted of:

Dollars in Thousands

# Transactions

Commitment

Funded(2)

Unfunded

Development property investments with 49.9% profits interest

14

(1) $118,440

$31,205

$87,235

Construction Loans

4

36,833

9,477

27,356

Operating Property Loans

6

20,460

19,983

477

Total

24

$175,733

$60,665

$115,068

(1) Includes $41.9 million ($7.5 million funded) in three
investments that will be transferred to the Heitman Joint Venture.

(2) Includes loan origination fees of approximately $1.7
million that are not reflected in the carrying value of the Company’s
investments on its balance sheet but are accreted into the carrying
value of investments as loans advance toward maturity. The Company’s
investments are carried at fair value. For the nine months ended
December 31, 2015, the Company had an increase of approximately $872,000
in the fair value of its investment portfolio. Taking into account the
deferred loan origination fees and the increase in fair value noted
above, the carrying value of the Company’s investments at December 31,
2015 was approximately $59.8 million.

For the year ended December 31, 2015 (nine months of operations), the
Company had interest income (including amortization of loan origination
fees) of approximately $1.7 million. For the quarter ended December 31,
2015, the Company’s interest income was approximately $1.0 million, an
increase of approximately $430,000, or 74.4% over interest income for
the quarter ended September 30, 2015. The increase in interest income
period-to-period was primarily due to increased funding of the Company’s
portfolio of development investments.

For the year ended December 31, 2015, the Company incurred general and
administrative expenses of approximately $4.7 million. For the quarter
ended December 31, 2015, general and administrative expenses were
approximately $1.9 million, an approximately $253,000, or 15.6%,
increase over general and administrative expenses for the quarter ended
September 30, 2015. The increase was attributable primarily to the
recognition of a full quarter’s compensation expense related to ten
employees who joined the Company after August 15, 2015 and certain taxes
incurred as a result of the Company’s relocation to Tennessee.

General and administrative expenses for the year ended December 31,
2015, as well as a comparison of general and administrative expenses for
the 3rd and 4th quarters, are as follows:

Dollars in Thousands

Quarter Ended

Nine-Months Ended

September 30

December 31

December 31

Compensation and benefits

$539

$641

$1,406

Occupancy

79

104

234

Business development

206

149

539

Professional fees

382

345

950

Management fees to Manager

414

414

1,237

Other

7

227

337

Total

$1,627

$1,880

$4,703

Of the compensation and benefits expense for the quarter ended December
31, 2015 approximately $138,000 consisted of stock-based compensation,
which is a non-cash expense, compared to approximately $133,000 for the
quarter ended September 30, 2015 and approximately $305,000 for the
nine-months ended December 31, 2015. For the year ending December 31,
2016, the Company expects its general and administrative expenses to
range from $7.4 million to $7.6 million, which includes $900,000 to
$950,000 of stock-based compensation.

As of December 31, 2015, the Company had total assets of $105.4 million,
total investments of $59.8 million, and total equity of $101.8 million.
As of December 31, 2015, the Company had no debt.

2016 Earnings Guidance

The company is providing initial diluted earnings per share of common
stock, Adjusted Earnings per share of common stock and Adjusted Cash
Earnings per share of common stock guidance for 2016 based on
management's current and expected views of company activity (including
fair value appreciation), the self-storage market, and overall economic
conditions. Adjusted Earnings is a measure that is not specifically
defined by accounting principles generally accepted in the United States
(“GAAP”) and is defined as net income plus stock-based compensation
expense, and Adjusted Cash Earnings is a non-GAAP measure and is defined
as Adjusted Earnings reduced by unrealized appreciation in fair value of
investments.

The Company estimates that its 2016 diluted earnings per share will
range from $0.64 and $1.09 per share, representing $0.86 at the
midpoint, and that its Adjusted Earnings per Share will be between $0.79
and $1.24 per share, representing $1.01 at the midpoint. The Company’s
estimates are based on the following key assumptions:

Heitman Joint Venture total capital commitments of $122.2 million and
Company’s transfer of three development property investments, two in
Miami, Florida, and one in Fort Lauderdale, Florida, with an aggregate
committed principal amount of $41.9 million to the Heitman Joint
Venture;

Additional advances of between $59.0 million and $60.0 million on
existing investment commitments by year-end 2016 (excluding the three
investments to be contributed to the Heitman Joint Venture), bringing
total funding to approximately $113.0 million on $133.8 million of
aggregate committed principal amount of investments;

Projected unrealized appreciation in the Company’s investment
portfolio pursuant to fair value accounting in 2016 ranging from
approximately $5.0 million to $7.0 million (approximately $0.80 per
share to approximately $1.12 per share), which increase includes the
effect of eight of the Company’s development property investments
being completed and entering lease-up;

Closing of proposed credit facility and utilization throughout 2016 of
between $35.0 million and $40.0 million of the Company’s proposed
credit facility to provide funding for existing investment commitments;

Total interest income for 2016 of approximately $6.0 million to $6.5
million and income from Heitman Joint Venture of $1.2 million to $1.3
million; and

General and administrative expenses for 2016 of approximately $7.4
million to $7.6 million (which includes non-cash stock-based
compensation of between $900,000 and $950,000).

Adjusted Cash Earnings per Share are estimated to range from $(0.01) per
share to $0.12 per share, representing $0.07 as the midpoint.

Conference Call and Webcast Information

The Company will host a webcast and conference call on Tuesday, March 8,
2016 at 11:00 a.m. Eastern Time to discuss the financial results and
recent events. A webcast will be available on the Company’s website at www.jernigancapital.com.
To listen to a live broadcast, access the site at least 15 minutes prior
to the scheduled start time in order to register and download and
install any necessary audio software. The archive of the webcast will be
available on the Company’s website until March 21, 2016.

Domestic: 1-800-283-8520International: 1-402-220-0870The
playback can be accessed until midnight Eastern Time on March 21, 2016.

About Jernigan Capital, Inc.

Jernigan Capital is a preferred capital source for self-storage
entrepreneurs, providing debt and equity capital to private developers,
owners and operators of self-storage facilities. Through its national
network of contacts developed by its business development team led by
Dean Jernigan, a 30+ year industry veteran, Jernigan Capital
originates self-storage capital solutions for the ground-up construction
of self-storage facilities or major self-storage redevelopment
opportunities, as well as for the acquisition of, refinancing of
existing indebtedness on, or recapitalization of existing self-storage
facilities. Jernigan Capital intends to elect to be taxed as a real
estate investment trust and is externally managed by JCap Advisors, LLC.

Forward-Looking Statements

This press release includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 and
other federal securities laws, including statements regarding our future
performance, our 2016 earnings guidance and related key assumptions,
future profits from investments, our future stock price, our Heitman
Joint Venture, including the potential, but not consummated, $75.0
million institutional co-investment in the Heitman Joint Venture, our
proposed credit facility, our loan pipeline, our anticipated loan
closings and future funding of existing loan commitments. The ultimate
occurrence of events and results referenced in these forward-looking
statements is subject to known and unknown risks and uncertainties, many
of which are beyond our control. These forward-looking statements are
based upon the Company's present intentions and expectations, but the
events and results referenced in these statements are not guaranteed to
occur. Investors should not place undue reliance upon forward-looking
statements. There can be no assurance that Heitman will procure a $75.0
million institutional co-investment in the Heitman Joint Venture, that
we will complete our proposed credit facility or that our expectations
of the future performance of our investments or the Heitman Joint
Venture will be achieved. There is the risk that we will fail to
successfully negotiate term sheets and enter into definitive agreements
with respect to prospective loan transactions included in the pipeline
described above, as well as the possibility that loans we anticipate
making in the future, for which we have signed term sheets, will not
close. For a discussion of these and other risks facing our business,
see the information under the heading “Risk Factors” in our Annual
Report on Form 10-K to be filed with the Securities and Exchange
Commission (“SEC”) and our other filings with the SEC from time to time,
which are accessible on the SEC’s website at www.sec.gov.

Non-GAAP Financial Measures

Adjusted Earnings is a non-GAAP measure and is defined as net income
plus stock-based compensation expense, and Adjusted Cash Earnings is a
non-GAAP measure and is defined as Adjusted Earnings reduced by
unrealized appreciation in fair value of investments. Management uses
Adjusted Earnings and Adjusted Cash Earnings as key performance
indicators in evaluating the operations of the Company's business. The
Company is a capital provider to self-storage developers and believes
that these measures are useful to management and investors as a starting
point in measuring its operational performance because they exclude
various non-cash items included in net income that do not relate to or
are not indicative of its operating performance, which can make periodic
and peer analyses of operating performance more difficult. The
Company’s computation of Adjusted Earnings and Adjusted Cash Earnings
may not be comparable to other key performance indicators reported by
other REITs or real estate companies.